A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that

Question

A monopolistically competitive firm faces the following demand curve for its product:  The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that

Quizplus · Accepted Answer

In the long-run, firms in monopolistic competition will enter or exit until they reach zero economic profit. In this case, the demand curve intersects with the average total cost curve at a point where the firm makes normal profit, so it is in long-run equilibrium. The constant marginal cost of $12 per unit also indicates that the firm is operating at its efficient scale. Therefore, neither A nor B is the correct answer.

A Monopolistically Competitive Firm Faces the Following Demand Curve for Its